Accounting Standard-Setting and Regulatory Bodies

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Standards

The website of the US SEC

The acronym US SEC represents the United States Securities and Exchange Commission. The US SEC ensures stable movement of complete and precise financial materials that assists investors in making a comprehensive financial judgment. Therefore, the organization protects the investors’ interest, enhances capital creation, and maintains and well-organized markets. The commissioners of the entity are selected by the President subject to approval from the Senate. Mary Jo White has been the Chair since 2013. The first commissioner is Luis A. Aguillar. He has been a commissioner since 2008. The second commissioner is Daniel M. Gallagher. Further, Kara M. Stein has been a commissioner since 2013. Finally, Micheal S. Piwowar has been a commissioner since 2013. All the commissioners do not have a background in accounting.

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The website of the Financial Accounting Standards Board

FASB stands for Financial Accounting and Standard Board. The Board was set up in the year 1973. The main role of the board is to develop and improve standards. The standards set up by the board guide in the preparation of the financial reports for the nongovernmental companies. The board develops and maintains GAAP. Further, the board maintains the Accounting Standards Codification. The chairman of the board is Russell G. Golden. He is a licensed CPA. The other board members are James L. Kroeker (has accounting background), Darly E. Buck (has accounting background), Thomas J. Linsmeier, R. Harold Schroeder (has accounting background), Marc A. Siegel, and Lawrence W. Smith (has accounting background).

The website of the International Accounting Standards Board

International Accounting Standards Board (IASB) is charged with the responsibility of setting accounting standards. The board comes up with and publishes the IFRS. It also develops IFRS for SMEs and approves the interpretations that are developed by the IFRS interpretation committee. The chairman of the board is Hans Hoogervorst. The chairman was appointed in 2011. The US based board members are Patrick Finnegan, Amaro Luiz de Oliveira Gomes, Gary Kabureck, and Mary Tokar. The other board members are based in other geographical regions such as Asia-Oceania, Europe, and Africa.

Multiple organizations promulgating accounting standards

The idea of having multiple organizations to develop accounting standards is a noble idea. Having numerous organizations will enhance competition. This will improve the quality of standards prepared. Further, the missions of these organizations are the same. Even though the idea of having one organization preparing the accounting standards enhances comparability of results, the quality of the standards will be poor. Therefore, standards that are prepared by various organizations will be of superior quality than those prepared by a single organization.

The website of the AICPA

The acronym AICPA stands for the American Institute of Certified Public Accountants. The role of the organization is to take care of the interest of the CPAs. Therefore, it safeguards the CPA profession by creating standards and rules, and being an advocate before the legislative bodies. The organization gives the members sufficient resources, and governance that enables them to execute their work with professionalism. AICPA does not license CPAs. The duty of issuing licenses is carried out by the individual states in the US.

In case a foreign student wants to be a licensed CPA in the United States, he/she needs to decide on the state which he/she wants to be licensed. The student then needs to contact the State Board of Accountancy for that state to obtain the requirements. The Board will review the educational qualification of the student and if they are not adequate, then the board will advise the student to take more courses. Once the foreign student meets the eligibility criteria, he/she will sit for the CPA exam. The State Board of Accountancy issues licenses to students upon fulfilling all the requirements.

Ireland is among the countries that entered into the Mutual Recognition Agreement with the National Association of the State Boards of Accountancy and AICPA. Therefore, a CPA from Ireland will need to do the special four and half hour International Qualifications Examination (IQEX) instead of the basic fourteen hour exam. In addition, the CPA will be required to meet all the prerequisites outlined by the board.

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The United States does not recognize titles from ACCA. Therefore, an individual with such titles will be required to complete all the basic requirements to become a CPA in the US. Therefore, the accountant will obtain the necessary requirements by contacting the State Board of Accountancy for the state he/she intends to work in. The accounted will be issued with a license once he or she meets all the requirements.

The website of the Accountancy Board of Ohio

Registration is done by an individual who is practicing public accounting and does not carry out structured services. On the other hand, a permit is mandatory for all CPAs and public accountants who carry out public accounting and offers controlled services.

To renew a license, a CPA needs to have 120 Continuing Professional Education (CPE) credits over a period of three years. Further, within a period of 24 months, a CPA needs to attain twenty-four credits in accounting, auditing, or taxation. Besides, every certified public account needs to earn three credits in the PSR. Further, the CPA needs to provide a certificate of completion or transcript as an evidence of completion of the CPE hours. Other documents that validate the time, location, the content of the program, and the date, are also accepted as evidence of completion of hours.

According to the 4701-7-04 Practices of Public Accounting and Regulated Services, the CPA needs to obtain an Ohio Permit and associated with a registered firm.

Dr. Kathryn Eileen Easterday is licensed to practice public accounting in the state of Ohio. Her license number is CPA.39002 while the credential status is active.

Codification

Two companies are considered to be financially interrelated entities if the operational and financial resolution of one company impacts on the other or if one company expects to have a continuing monetary interest in the disposable assets of the second company.

There are three conditions that must be met for an equity security to have a readily determinable fair value. First, the sales price or the bid-asked quotations of the security should be presently accessible on the securities exchange. Such securities exchange must be catalogued with the US SEC. The prices and the quotations can also be obtained from the over-the-counter market as long as they are publicly reported by the National Association of Securities Dealers Automated Quotation systems. Secondly, for equity securities that trade in foreign markets, the fair value is easily obtained if the size of the foreign market similar to any of the security markets listed by the US SEC. The third condition is that for an investment that trades in a mutual fund, the fair value is obtained easily fair value of each share is estimated and made available to the public.

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A change in accounting estimate has the effect of altering the balance brought down of a present asset or liability. Such changes in accounting estimate also have an effect of varying the subsequent treatment of current or future assets or liabilities. Such changes are important since they arise from the evaluation of current and future state of the assets and liabilities. The main cause of the change in accounting estimate is the existence of new information that relate to the assets and liabilities. Examples of such new information are unrecoverable accounts receivable and warranty obligations.

The Accounting Standards Codification requires that the information concerning the accounting policies used in preparing the financial statements should be disclosed. An explanation of the important accounting policies used should be incorporated as an essential component of the financial statement. Thus, the disclosure should comprise of the accounting standards used and the procedures used for applying these standards.

Elements of financial statements

The full set of financial statements for a financial year should show the financial position at the end of the period, earnings for the period, comprehensive income for the period, cash flow during the period, and investments by and distributions to owners during the period, FASB CON 5, Par. 13-14 (Financial Accounting Standards Board 9).

The financial statements are interconnected because they present an item in different ways. Even though they provide different outcomes, none of them can independently provide all the required information. Thus, the statements supplement each other. For instance, when evaluating the liquidity position of a company, the statement of financial position is often used (Financial Accounting Standards Board 10). However, using this statement of financial position to evaluate the liquidity is not adequate. A user should also review the cash flow statement. Further, evaluation of certain attributes such as profitability requires the use of more than one financial statement. In order to make sound financial decision, it is important to review all the financial statements of a company, FASB CON 5, Par. 23-24 (Financial Accounting Standards Board 10).

The concept of recognition in accounting focuses on treatment of an accounting transaction or item. It entails officially integrating or recording a transaction or an item into the financial statements of a company. Such items are “recorded in the form an asset, expense, revenue or a liability” (Financial Accounting Standards Board 17). Thus, the items should be recorded both in numerical and words. In the case of assets and liabilities, recognition takes place both during the purchase / incurrence of the item and during subsequent changes of an item that had been recognized initially, FASB CON 5, Par. 6 and 58 (Financial Accounting Standards Board 17).

The fundamental criteria for recognition are that a transaction needs to meet the definition of a constituent of the financial statement, the item should be measurable with adequate consistency, the transaction should be able to make a difference in the decision making process of the user (relevance), and the information should be reliable. Once an item meets the four criteria, there are other factors that will affect the decision to record such item. These are the cost-benefit limitations and the materiality threshold, FASB CON 5, Par. 63 (Financial Accounting Standards Board 17).

Works Cited

Financial Accounting Standards Board. Statement of Financial Accounting Concepts No.5: Recognition and Measurement in Financial Statements of Business Enterprises. 2008. PDF File. Web.

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BusinessEssay. (2022, March 29). Accounting Standard-Setting and Regulatory Bodies. Retrieved from https://business-essay.com/accounting-standard-setting-and-regulatory-bodies/

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BusinessEssay. (2022, March 29). Accounting Standard-Setting and Regulatory Bodies. https://business-essay.com/accounting-standard-setting-and-regulatory-bodies/

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